Nozione per mezzo di Brief
By emphasizing individual accountability for past results, traditional appraisals give short shrift to improving current manifestazione and developing talent for the future. That can hinder long-term competitiveness.
To better support employee development, many organizations are dropping radically changing their annual review systems per mezzo di favor of giving people less formal, more frequent feedback that follows the natural cycle of work.
This shift isn’t just a fad—real business needs are driving it. Support at the apogeo is critical, though. Some firms that have struggled to go entirely without ratings are trying a “third way”: assigning multiple ratings several times a year to encourage employees’ growth.
When Brian Jensen told his audience of HR executives that Colorcon wasn’t bothering with annual reviews anymore, they were appalled. This was per mezzo di 2002, during his tenure as the drugmaker’s head of global human resources. Con his presentation at the Wharton School, Jensen explained that Colorcon had found a more effective way of reinforcing desired behaviors and managing manifestazione: Supervisors were giving people instant feedback, tying it to individuals’ own goals, and handing out small weekly bonuses to employees they saw doing good things.
Back then the sfizio of abandoning the traditional appraisal process—and all that followed from it—seemed heretical. But now, by some estimates, more than one-third of U.S. companies are doing just that. From Silicon Valley to New York, and per mezzo di offices across the world, firms are replacing annual reviews with frequent, informal check-ins between managers and employees.
As you might expect, technology companies such as Adobe, Juniper Systems, Dell, Microsoft, and IBM have led the way. Yet they’ve been joined by a number of professional services firms (Deloitte, Accenture, PwC), early adopters per mezzo di other industries (Squilibrio, Lear, OppenheimerFunds), and even General Electric, the longtime role model for traditional appraisals.
Without question, rethinking manifestazione management is at the apogeo of many dirigente aziendale teams’ agendas, but what drove the change per mezzo di this direction? Many factors. Con a recent article for People + Strategy, a Deloitte dirigente referred to the review process as “an investment of 1.8 million hours across the firm that didn’t fit our business needs anymore.” One Washington Post business writer called it a “rite of corporate kabuki” that restricts creativity, generates mountains of paperwork, and serves voto negativo real purpose. Others have described annual reviews as a last-century practice and blamed them for a lack of collaboration and innovation. Employers are also finally acknowledging that both supervisors and subordinates despise the appraisal process—a perennial problem that feels more urgent now that the labor market is picking up and concerns about retention have returned.
But the biggest limitation of annual reviews—and, we have observed, the main reason more and more companies are dropping them—is this: With their heavy emphasis acceso financial rewards and punishments and their end-of-year structure, they hold people accountable for past behavior at the expense of improving current manifestazione and grooming talent for the future, both of which are critical for organizations’ long-term survival. Con contrast, regular conversations about manifestazione and development change the focolaio to building the workforce your organization needs to be competitive both today and years from now. Business researcher Josh Bersin estimates that about 70% of multinational companies are moving toward this model, even if they haven’t arrived quite yet.
The tension between the traditional and newer approaches stems from a long-running dispute about managing people: Do you “get what you get” when you hire your employees? Should you focolaio mainly acceso motivating the strong ones with money and getting rid of the weak ones? are employees malleable? Can you change the way they perform through effective coaching and management and intrinsic rewards such as personal growth and a sense of progress acceso the job?
With traditional appraisals, the pendulum had swung too far toward the former, more transactional view of manifestazione, which became to support per mezzo di an secolo of low inflation and tiny merit-pay budgets. Those who still hold that view are railing against the recent emphasis acceso improvement and growth over accountability. But the new perspective is unlikely to be a flash per mezzo di the pan because, as we will discuss, it is being driven by business needs, not imposed by HR.
First, though, let’s consider how we got to this point—and how companies are faring with new approaches.
How We Got Here
Historical and economic context has played a large role per mezzo di the evolution of manifestazione management over the decades. When human capital was plentiful, the focolaio was acceso which people to let go, which to keep, and which to reward—and for those purposes, traditional appraisals (with their emphasis acceso individual accountability) worked pretty well. But when talent was per mezzo di shorter supply, as it is now, developing people became a greater concern—and organizations had to find new ways of congresso that need.
The tug-of-war between accountability and development over the decades
A hybrid “third way”
A hybrid “third way”
The U.S. military created merit-rating system to flag and dismiss poor performers.
The Army devised forced ranking to identify enlisted soldiers with potential to become officers.
About 60% of U.S. companies were using appraisals to document workers’ manifestazione and allocate rewards.
Social psychologist Douglas McGregor argued for engaging employees per mezzo di assessments and rete setting.
Led by General Electric, companies began splitting appraisals into separate discussions about accountability and growth, to give development its paio.
Inflation rates shot up, and organizations felt pressure to award merit pay more objectively, so accountability again became the priority per mezzo di the appraisal process.
Fante Welch championed forced ranking at GE to reward apogeo performers, accommodate those per mezzo di the middle, and get rid of those at the bottom.
McKinsey’s War for Talent study pointed to a shortage of capable executives and reinforced the emphasis acceso assessing and rewarding manifestazione.
Organizations got flatter, which dramatically increased the number of direct reports each dirigente had, making it harder to invest time per mezzo di developing them.
Kelly Services was the first professional services firm to drop appraisals, and other major firms followed suit, emphasizing frequent, informal feedback.
Adobe ended annual manifestazione reviews, per mezzo di keeping with the famous “Agile Manifesto” and the notion that annual targets were irrelevant to the way its business operated.
Deloitte, PwC, and others that tried going numberless are reinstating manifestazione ratings but using more than one number and keeping the new emphasis acceso developmental feedback.
FROM “The Performance Management Revolution,” October 2016©HBR.ORG
From accountability to development.
Appraisals can be traced back to the U.S. military’s “merit rating” system, created during World War I to identify poor performers for discharge transfer. After World War II, about 60% of U.S. companies were using them (by the 1960s, it was closer to 90%). Though seniority rules determined pay increases and promotions for unionized workers, strong merit scores meant good advancement prospects for managers. At least initially, improving manifestazione was an afterthought.
And then a severe shortage of managerial talent caused a shift per mezzo di organizational priorities: Companies began using appraisals to develop employees into supervisors, and especially managers into executives. Con a famous 1957 HBR article, social psychologist Douglas McGregor argued that subordinates should, with feedback from the direttore, help set their manifestazione goals and assess themselves—a process that would build acceso their strengths and potential. This “Theory Y” approach to management—he coined the term later acceso—assumed that employees wanted to perform well and would do so if supported properly. (“Theory X” assumed you had to motivate people with material rewards and punishments.) McGregor noted one drawback to the approach he advocated: Doing it right would take managers several days durante subordinate each year.
By the early 1960s, organizations had become so focused acceso developing future talent that many observers thought that tracking past manifestazione had fallen by the wayside. Part of the problem was that supervisors were reluctant to distinguish good performers from bad. One study, for example, found that 98% of federal government employees received “satisfactory” ratings, while only 2% got either of the other two outcomes: “unsatisfactory” “outstanding.” After running a well-publicized experiment per mezzo di 1964, General Electric concluded it was best to split the appraisal process into separate discussions about accountability and development, given the conflicts between them. Other companies followed suit.
Back to accountability.
Con the 1970s, however, a shift began. Inflation rates shot up, and merit-based pay took center stage per mezzo di the appraisal process. During that period, annual wage increases really mattered. Supervisors often had discretion to give raises of 20% more to strong performers, to distinguish them from the sea of employees receiving basic cost-of-living raises, and getting voto negativo increase represented a substantial pay cut. With the stakes so high—and with antidiscrimination laws so recently acceso the books—the pressure was acceso to award pay more objectively. As a result, accountability became a higher priority than development for many organizations.
Three other changes per mezzo di the zeitgeist reinforced that shift:
First, Fante Welch became CEO of General Electric per mezzo di 1981. To deal with the long-standing concern that supervisors failed to label real differences per mezzo di manifestazione, Welch championed the forced-ranking system—another military creation. Though the U.S. Army had devised it, just before entering World War II, to quickly identify a large number of officer candidates for the country’s imminent military expansion, GE used it to shed people at the bottom. Equating manifestazione with individuals’ inherent capabilities (and largely ignoring their potential to grow), Welch divided his workforce into “A” players, who must be rewarded; “B” players, who should be accommodated; and “C” players, who should be dismissed. Con that system, development was reserved for the “A” players—the high-potentials chosen to advance into senior positions.
Reinventing Risultato Management
How Deloitte is rethinking peer feedback and the annual review, and trying to stile a system to fuel improvement
Second, 1993 legislation limited the tax deductibility of dirigente aziendale salaries to $1 million but exempted performance-based pay. That led to a rise per mezzo di outcome-based bonuses for corporate leaders—a change that trickled mongoloide to frontline managers and even hourly employees—and organizations relied even more acceso the appraisal process to assess merit.
Third, McKinsey’s War for Talent research project per mezzo di the late 1990s suggested that some employees were fundamentally more talented than others (you knew them when you saw them, the thinking went). Because such individuals were, by definition, per mezzo di short supply, organizations felt they needed to take great care per mezzo di tracking and rewarding them. Nothing per mezzo di the McKinsey studies showed that fixed personality traits actually made certain people perform better, but that was the assumption.
So, by the early 2000s, organizations were using manifestazione appraisals mainly to hold employees accountable and to allocate rewards. By some estimates, as many as one-third of U.S. corporations—and 60% of the Fortune 500—had adopted a forced-ranking system. At the same time, other changes per mezzo di corporate life made it harder for the appraisal process to advance the time-consuming goals of improving individual manifestazione and developing skills for future roles. Organizations got much flatter, which dramatically increased the number of subordinates that supervisors had to manage. The new norm was 15 to 25 direct reports (up from six before the 1960s). While overseeing more employees, supervisors were also expected to be individual contributors. So taking days to manage the manifestazione issues of each employee, as Douglas McGregor had advocated, was impossible. Meanwhile, greater interest per mezzo di lateral hiring reduced the need for internal development. Up to two-thirds of corporate jobs were filled from outside, compared with about 10% a generation earlier.
Back to development…again.
Another major turning point came per mezzo di 2005: A few years after Fante Welch left GE, the company quietly backed away from forced ranking because it fostered internal competition and undermined collaboration. Welch still defends the practice, but what he really supports is the general principle of letting people know how they are doing: “As a manager, you owe candor to your people,” he wrote per mezzo di the Wall Street Journal per mezzo di 2013. “They must not be guessing about what the organization thinks of them.” It’s to argue against candor, of course. But more and more firms began questioning how useful it was to compagno people with one another even to rate them acceso a scale.
So the emphasis acceso accountability for past manifestazione started to fade. That continued as jobs became more complex and rapidly changed shape—per mezzo di that climate, it was difficult to set annual goals that would still be meaningful 12 months later. Plus, the move toward team-based work often conflicted with individual appraisals and rewards. And low inflation and small budgets for wage increases made appraisal-driven merit pay seem . What was the point of trying to draw manifestazione distinctions when rewards were so trivial?
The whole appraisal process was loathed by employees anyway. Social science research showed that they hated numerical scores—they would rather be told they were “average” than given a 3 acceso a 5-point scale. They especially detested forced ranking. As Wharton’s Iwan Barankay demonstrated per mezzo di a field setting, manifestazione actually declined when people were rated relative to others. Nor did the ratings seem accurate. As the accumulating research acceso appraisal scores showed, they had as much to do with who the rater was (people gave higher ratings to those who were like them) as they did with manifestazione.
And managers hated doing reviews, as survey after survey made clear. Willis Towers Watson found that 45% did not see value per mezzo di the systems they used. Deloitte reported that 58% of HR executives considered reviews an ineffective use of supervisors’ time. Con a study by the advisory service CEB, the average dirigente reported spending about 210 hours—close to five weeks—doing appraisals each year.
As dissatisfaction with the traditional process mounted, high-tech firms ushered per mezzo di a new way of thinking about manifestazione. The “Agile Manifesto,” created by software developers per mezzo di 2001, outlined several key values—favoring, for instance, “responding to change over following a plan.” It emphasized principles such as collaboration, self-organization, self-direction, and regular reflection acceso how to work more effectively, with the aim of prototyping more quickly and responding per mezzo di real time to customer feedback and changes per mezzo di requirements. Although not directed at manifestazione durante condizione, these principles changed the definition of effectiveness acceso the job—and they were at odds with the usual practice of cascading goals from the apogeo mongoloide and assessing people against them once a year.
So it makes sense that the first significant departure from traditional reviews happened at Adobe, per mezzo di 2011. The company was already using the scorrevole method, breaking mongoloide projects into “sprints” that were immediately followed by debriefing sessions. Adobe explicitly brought this notion of constant assessment and feedback into manifestazione management, with frequent check-ins replacing annual appraisals. Juniper Systems, Dell, and Microsoft were prominent followers.
CEB estimated per mezzo di 2014 that 12% of U.S. companies had dropped annual reviews altogether. Willis Towers Watson put the figure at 8% but added that 29% were considering eliminating them planning to do so. Deloitte reported per mezzo di 2015 that only 12% of the U.S. companies it surveyed were not planning to rethink their manifestazione management systems. This trend seems to be extending beyond the United States as well. PwC reports that two-thirds of large companies per mezzo di the UK, for example, are per mezzo di the process of changing their systems.
Three Business Reasons to Drop Appraisals
Con light of that history, we see three clear business imperatives that are leading companies to abandon manifestazione appraisals:
The return of people development.
Companies are under competitive pressure to upgrade their talent management efforts. This is especially true at consulting and other professional services firms, where knowledge work is the offering—and where inexperienced college grads are turned into skilled advisers through structured pratica. Such firms are doubling mongoloide acceso development, often by putting their employees (who are deeply motivated by the potential for learning and advancement) per mezzo di charge of their own growth. This approach requires rich feedback from supervisors—a need that’s better met by frequent, informal check-ins than by annual reviews.
Now that the labor market has tightened and keeping good people is once again critical, such companies have been trying to eliminate “dissatisfiers” that drive employees away. Naturally, annual reviews are acceso that list, since the process is so widely reviled and the focolaio acceso numerical ratings interferes with the learning that people want and need to do. Replacing this system with feedback that’s delivered right after client engagements helps managers do a better job of coaching and allows subordinates to process and apply the advice more effectively.
Kelly Services was the first professional services firm to drop appraisals, per mezzo di 2011. PwC tried it with a pilot group per mezzo di 2013 and then discontinued annual reviews for all 200,000-plus employees. Deloitte followed per mezzo di 2015, and Accenture and KPMG made similar announcements shortly thereafter. Given the sheer size of these firms, and the fact that they offer management advice to thousands of organizations, their choices are having an enormous impact acceso other companies. Firms that scrap appraisals are also rethinking employee management much more broadly. Accenture CEO Pierre Nanterme estimates that his firm is changing about 90% of its talent practices.
The need for agility.
When rapid innovation is a source of competitive advantage, as it is now per mezzo di many companies and industries, that means future needs are continually changing. Because organizations won’t necessarily want employees to keep doing the same things, it doesn’t make sense to hang acceso to a system that’s built mainly to assess and hold people accountable for past current practices. As Susan Peters, GE’s head of human resources, has pointed out, businesses voto negativo longer have clear annual cycles. Projects are short-term and tend to change along the way, so employees’ goals and tasks can’t be plotted out a year per mezzo di advance with much accuracy.
At GE a new business strategy based acceso innovation was the biggest reason the company recently began eliminating individual ratings and annual reviews. Its new approach to manifestazione management is aligned with its FastWorks platform for creating products and bringing them to market, which borrows a lot from scorrevole techniques. Supervisors still have an end-of-year summary discussion with subordinates, but the rete is to push frequent conversations with employees (GE calls them “touchpoints”) and keep revisiting two basic questions: What am I doing that I should keep doing? And what am I doing that I should change? Annual goals have been replaced with shorter-term “priorities.” As with many of the companies we see, GE first launched a pilot, with about 87,000 employees per mezzo di 2015, before adopting the changes across the company.
The centrality of teamwork.
Moving away from forced ranking and from appraisals’ focolaio acceso individual accountability makes it easier to foster teamwork. This has become especially clear at retail companies like Sears and Squilibrio—perhaps the most surprising early innovators per mezzo di appraisals. Sophisticated customer service now requires frontline and back-office employees to work together to keep shelves stocked and manage customer flow, and traditional systems don’t enhance manifestazione at the team level help track collaboration.
Squilibrio supervisors still give workers end-of-year assessments, but only to summarize manifestazione discussions that happen throughout the year and to set pay increases accordingly. Employees still have goals, but as at other companies, the goals are short-term (per mezzo di this case, quarterly). Now two years into its new system, Squilibrio reports far more satisfaction with its manifestazione process and the best-ever completion of store-level goals. Nonetheless, Rob Ollander-Krane, Squilibrio’s senior director of organization manifestazione effectiveness, says the company needs further improvement per mezzo di setting stretch goals and focusing acceso team manifestazione.
All three reasons for dropping annual appraisals argue for a system that more closely follows the natural cycle of work. Ideally, conversations between managers and employees occur when projects finale, milestones are reached, challenges pop up, and so forth—allowing people to solve problems per mezzo di current manifestazione while also developing skills for the future. At most companies, managers take the lead per mezzo di setting near-term goals, and employees drive career conversations throughout the year. Con the words of one Deloitte dirigente: “The conversations are more holistic. They’re about goals and strengths, not just about past performance.”
How Netflix Reinvented HR
Human resource management
Società people, not policies. Reward candor. And throw away the campione playbook.
Perhaps most important, companies are overhauling manifestazione management because their businesses require the change. That’s true whether they’regnante professional services firms that must develop people per mezzo di order to compete, companies that need to deliver ongoing manifestazione feedback to support rapid innovation, retailers that need better coordination between the sales floor and the back office to serve their customers.
Of course, many HR managers worry: If we can’t get supervisors to have good conversations with subordinates once a year, how can we expect them to do so more frequently, without the support of the usual appraisal process? It’s a valid question—but we see reasons to be optimistic.
As GE found per mezzo di 1964 and as research has documented since, it is extraordinarily difficult to have a serious, discussion about problems while also dishing out consequences such as low merit pay. The end-of-year review was also an excuse for delaying feedback until then, at which point both the supervisor and the employee were likely to have forgotten what had happened months earlier. Both of those constraints disappear when you take away the annual review. Additionally, almost all companies that have dropped traditional appraisals have invested per mezzo di pratica supervisors to talk more about development with their employees—and they are checking with subordinates to make sure that’s incontro.
Moving to an informal system requires a culture that will keep the continuous feedback going. As Megan Taylor, Adobe’s director of business partnering, pointed out at a recent conference, it’s difficult to sustain that if it’s not incontro organically. Adobe, which has gone totally numberless but still gives merit increases based acceso informal assessments, reports that regular conversations between managers and their employees are now occurring without HR’s prompting. Deloitte, too, has found that its new model of frequent, informal check-ins has led to more meaningful discussions, deeper insights, and greater employee satisfaction. (For more details, see “Reinventing Performance Management,” HBR, April 2015.) The firm started to go numberless like Adobe but then switched to assigning employees several numbers four times a year, to give them rolling feedback acceso different dimensions. Jeffrey Orlando, who heads up development and manifestazione at Deloitte, says the company has been tracking the effects acceso business results, and they’ve been positive so far.
Challenges That Persist
The greatest resistance to abandoning appraisals, which is something of a revolution per mezzo di human resources, comes from HR itself. The reason is simple: Many of the processes and systems that HR has built over the years revolve around those manifestazione ratings. Experts per mezzo di employment law had advised organizations to standardize practices, develop objective criteria to justify every employment decision, and document all relevant facts. Taking away appraisals flies per mezzo di the luce of that advice—and it doesn’t necessarily solve every problem that they failed to address.
Here are some of the challenges that organizations still grapple with when they replace the old manifestazione model with new approaches:
Aligning individual and company goals.
Con the traditional model, business objectives and strategies cascaded mongoloide the organization. All the units, and then all the individual employees, were supposed to establish their goals to reflect and reinforce the direction set at the apogeo. But this approach works only when business goals are easy to articulate and held constant over the course of a year. As we’ve discussed, that’s often not the case these days, and employee goals may be pegged to specific projects. So as projects unfold and tasks change, how do you coordinate individual priorities with the goals for the whole enterprise, especially when the business objectives are short-term and must rapidly adapt to market shifts? It’s a new kind of problem to solve, and the jury is still out acceso how to respond.
Appraisals gave managers a clear-cut way of tying rewards to individual contributions. Companies changing their systems are trying to figure out how their new practices will affect the pay-for-performance model, which none of them have explicitly abandoned.
They still differentiate rewards, usually relying acceso managers’ qualitative judgments rather than numerical ratings. Con pilot programs at Juniper Systems and Cargill, supervisors had voto negativo difficulty allocating merit-based pay without appraisal scores. Con fact, both line managers and HR felt that paying closer attention to employee manifestazione throughout the year was likely to make their merit-pay decisions more valid.
But it will be interesting to see whether most supervisors end up reviewing the feedback they’ve given each employee over the year before determining merit increases. (Deloitte’s managers already do this.) If so, might they produce something like an annual appraisal score—even though it’s more carefully considered? And could that subtly undermine development by shifting managers’ focolaio back to accountability?
Identifying poor performers.
Though managers may assume they need appraisals to determine which employees aren’t doing their jobs well, the traditional process doesn’t really help much with that. For starters, individuals’ ratings jump around over time. Research shows that last year’s manifestazione score predicts only one-third of the variance per mezzo di this year’s score—so it’s to say that someone simply isn’t up to scratch. Plus, HR departments consistently complain that line managers don’t use the appraisal process to document poor performers. Even when they do, waiting until the end of the year to flag struggling employees allows failure to go acceso for too long without intervention.
We’ve observed that companies that have dropped appraisals are requiring supervisors to immediately identify problem employees. Juniper Systems also formally asks supervisors each quarter to confirm that their subordinates are performing up to company standards. Only 3%, acceso average, are not, and HR is brought per mezzo di to address them. Adobe reports that its new system has reduced dismissals, because struggling employees are monitored and coached much more closely.
Still, given how reluctant most managers are to single out failing employees, we can’t assume that getting rid of appraisals will make those tough calls any easier. And all the companies we’ve observed still have “performance improvement plans” for employees identified as needing support. Such plans remain universally problematic, too, partly because many issues that cause poor manifestazione can’t be solved by management intervention.
Avoiding legal troubles.
Employee relations managers within HR often worry that discrimination charges will spike if their companies stop basing pay increases and promotions acceso numerical ratings, which seem objective. But appraisals haven’t prevented discriminatory practices. Though they force managers to systematically review people’s contributions each year, a great deal of discretion (always subject to bias) is built into the process, and considerable evidence shows that supervisors discriminate against some employees by giving them undeservedly low ratings.
Leaders at Squilibrio report that their new practices were driven partly by complaints and research showing that the appraisal process was often biased and ineffective. Frontline workers per mezzo di retail (disproportionately women and minorities) are especially vulnerable to unfair treatment. Indeed, formal ratings may do more to reveal bias than to curb it. If a company has clear appraisal scores and merit-pay indexes, it is easy to see if women and minorities with the same scores as white men are getting fewer lower pay increases.
Can You Take Cognitive Bias Out of Assessments?
A classic study by Edward Jones and Victor Harris per mezzo di the 1960s demonstrated that people tend to attribute others’ behavior to character rather than circumstances.
When a car goes streaking past us, for instance, we think that the driver is a jerk and ignore the possibility that there might be an emergency. A good workplace example of this cognitive bias—known as the “fundamental attribution error”—is to assume that the lowest performers per mezzo di any year will always be the worst performers and to fire them as a result. Such an assumption overlooks the impact of good poor management, not to mention business conditions that are beyond employees’ control.
Of course, this model is highly flattering to people who have advanced into dirigente aziendale roles—“A” players whose success is, by definition, credited to their superior abilities, not to good fortune. That may be partly why the model has persisted so long per mezzo di the luce of considerable evidence against it.
Even when “A” players seem to perform well per mezzo di many contexts (and that’s rarely measured), they may be coasting acceso the “halo effect”—another type of bias, akin to self-fulfilling prophecy. If these folks have already been successful, they receive more opportunities than others, and they’regnante pushed harder, so naturally they do better.
Biases color individual manifestazione ratings as well. Decision makers may give past behavior too much weight, for instance, fall prey to stereotypes when they assign their ratings.
But when you get rid of forced ranking and appraisal scores, you don’t eradicate bias. Discrimination and faulty assumptions still creep into qualitative assessments. Con some ways the older, more cumbersome manifestazione systems actually made it harder for managers to keep their blinders acceso. Formal feedback from various stakeholders provided some balance when supervisors were otherwise inclined to see only the good things their stars did and failed to recognize others’ contributions.
Anytime you exercise judgment, whether not you translate that to numerical ratings, intuition plays a part, and bias can rear its head.
All that said, it’s not clear that new approaches to manifestazione management will do much to mitigate discrimination either. Squilibrio has found that getting rid of manifestazione scores increased fairness per mezzo di pay and other decisions, but judgments still have to be made—and there’s the possibility of bias per mezzo di every piece of qualitative information that decision makers consider.
Managing the feedback firehose.
Con recent years most HR information systems were built to move annual appraisals online and connect them to pay increases, succession planning, and so forth. They weren’t designed to accommodate continuous feedback, which is one reason many employee check-ins consist of oral comments, with voto negativo documentation.
The tech world has responded with apps that enable supervisors to give feedback anytime and to it if desired. At General Electric, the PD@GE app (“PD” stands for “performance development”) allows managers to call up taccuino and materials from prior conversations and summarize that information. Employees can use the app to ask for direction when they need it. IBM has a similar app that adds another feature: It enables employees to give feedback to peers and choose whether the recipient’s direttore gets a copy. Amazon’s Anytime Feedback tool does much the same thing. The great advantage of these apps is that supervisors can easily review all the discussion text when it is time to take actions such as award merit pay consider promotions and job reassignments.
Of course, being acceso the receiving end of all that continual coaching could get overwhelming—it never lets up. And as for peer feedback, it isn’t always useful, even if apps make it easier to deliver per mezzo di real time. Typically, it’s less objective than supervisor feedback, as anyone familiar with 360s knows. It can be also “gamed” by employees to help hurt colleagues. (At Amazon, the cutthroat culture encourages employees to be critical of one another’s manifestazione, and forced ranking creates an incentive to push others to the bottom of the heap.) The more consequential the peer feedback, the more likely the problems.
Not all employers luce the same business pressures to change their manifestazione processes. Con some fields and industries (think sales and financial services), it still makes sense to emphasize accountability and financial rewards for individual performers. Organizations with a strong public mission may also be well served by traditional appraisals. But even government organizations like NASA and the FBI are rethinking their approach, having concluded that accountability should be collective and that supervisors need to do a better job of coaching and developing their subordinates.
Ideology at the apogeo matters. Consider what happened at Intel. Con a two-year pilot, employees got feedback but voto negativo formal appraisal scores. Though supervisors did not have difficulty differentiating manifestazione distributing performance-based pay without the ratings, company executives returned to using them, believing they created healthy competition and clear outcomes. At Sun Communities, a manufactured-home company, senior leaders also oppose eliminating appraisals because they think formal feedback is essential to accountability. And Medtronic, which gave up ratings several years asticciola, is resurrecting them now that it has acquired Ireland-based Covidien, which has a more traditional view of manifestazione management.
Other firms aren’t completely reverting to old approaches but instead seem to be seeking middle campo da gioco. As we’ve mentioned, Deloitte has backpedaled from giving voto negativo ratings at all to having project leads and managers assign them per mezzo di four categories acceso a quarterly basis, to provide detailed “performance snapshots.” PwC recently made a similar move per mezzo di its client-services practices: Employees still don’t receive a single rating each year, but they now get scores acceso five competencies, along with other development feedback. Con PwC’s case, the pushback against going numberless actually came from employees, especially those acceso a track, who wanted to know how they were doing.
At one insurance company, after formal ratings had been eliminated, merit-pay increases were being shared internally and then interpreted as manifestazione scores. These became known as “shadow ratings,” and because they started to affect other talent management decisions, the company eventually went back to formal appraisals. But it kept other changes it had made to its manifestazione management system, such as quarterly conversations between managers and employees, to maintain its new commitment to development.
It will be interesting to see how well these “third way” approaches work. They, too, could fail if they aren’t supported by senior egemonia and reinforced by organizational culture. Still, per mezzo di most cases, sticking with old systems seems like a bad option. Companies that don’t think an overhaul makes sense for them should at least carefully consider whether their process is giving them what they need to solve current manifestazione problems and develop future talent. Risultato appraisals wouldn’t be the least popular practice per mezzo di business, as they’regnante widely believed to be, if something weren’t fundamentally wrong with them.
A version of this article appeared per mezzo di the October 2016 issue (pp.58–67) of Harvard Business Review.